Finding Value As a Result of CAPEX Spending: JDS Uniphase Corp (JDSU), Alcatel Lucent SA (ALU)

Another company to benefit from increased CAPEX spending is a small cap stock Oclaro, Inc. (NASDAQ:OCLR) . The stock rallied 9% on Thursday after earnings from JDS Uniphase due to it sharing a similar optical component structure and business model. The theory is that Oclaro should also see a boost in demand if it’s occurring throughout the industry.

Lastly, Alcatel Lucent SA (ADR) (NYSE:ALU) traded higher by 6.50% on Thursday, and is perhaps the most diversified in the business. I believe that Alcatel is best positioned to benefit because it’s AT&T’s largest equipment supplier and AT&T has already announced significant increases in CAPEX spending. The majority of Ericsson and JDSU’s growth came from America; therefore investors should be optimistic for the outlook of Alcatel. Furthermore, the stock is the cheapest of the bunch, with a price/sales of under 0.20.

Conclusion

Whether strong demand and solid earnings is an industry wide occurrence or is simply a company related strength, the entire space is trading higher on Thursday. This is a space that is fairly valued due to assumed weakness, and it’s this presumed weakness that is now creating gains with an increase in demand. As a result, I suggest a long hard look at this space, because it’s very possible that you’ll find value within.

The article Finding Value As a Result of CAPEX Spending originally appeared on Fool.com and is written by Brian Nichols.

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